Indigenous Services Canada releases details of $34 million FSIN audit

WATCH: The federal government is making a series of recommendations after a forensic audit flagged over $34 million in possible misspending at the FSIN.

The federal government is making a series of recommendations after a forensic audit flagged over $34 million in possible misspending at the Federation of Sovereign Indigenous Nations (FSIN).

On Wednesday, Indigenous Services Canada (ISC) released a summary of results from a forensic audit into FSIN spending, conducted after allegations were raised that federal dollars were being used for things not listed in the funding agreements.

The audit, performed by KPMG, reviewed $47.1 million in transactions from April 1, 2019 to March 31, 2024.

About $34.2 million worth of those transactions were flagged by the firm. Of that total, KPMG identified $3.7 million as “ineligible,” $30.3 million as “questionable” and $155,595 as “unsupported.”

Former Flying Dust First Nation chief Bob Merasty, who also served as a vice chief with the FSIN in 2017, said the organization has lost its way.

“We need to change the status quo,” he said. “An elder shared with that its got to get to the worst situation before things will get better, and I believe that honestly, we’re pretty close to that status now.”

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The largest of nine allegations against the FSIN related to expenses tied to COVID-19 funding.

“Expenditures were categorized as questionable in the amount of $23,451,907, where we were unable to obtain complete supporting documentation to determine eligibility,” the summary report said.

The report defines questionable expenditures as those where supporting documentation was not provided, or findings of the audit suggest expenditures may not be eligible for ISC funding.

Merasty said the FSIN has changed over the last 15 years, and this audit can be opportunity to restart and get the FSIN back to its core governance principles of all nations moving together.

“Our people are kind of sick with this,” Merasty said. “They’re tired of this, and we need to clean house.”

FSIN, which represents 74 Saskatchewan First Nations and more than 155,000 people, is being told improve its processes around how it passes money along to First Nations.

The recommendations include:

• Obtaining budgets and planning information from groups to make sure funding meets its desired need;
• Documenting where purchases are made on behalf of the recipient;
• Report when funding is received through invoices and document reasons when variances exist;
• Consider tracking expenditures with a funding letter to present how ISC funding was spent, which ISC says will also help determine funding eligibility

Merasty feels the audit doesn’t go far enough, and there should be further follow up to recover the funds or hold FSIN and its executive accountable.

“I believe we need to implement an absolute action of non-confidence,” Merasty said. “Potential criminal charges must be investigated.”

The audit also flagged several issues with travel expenses and fleet vehicles.

During the review period, 22 vehicles were purchased for more than $1.3 million. The report says the entire executive team bought new vehicles twice — roughly a year and a half apart — and that exceeded the approved amount.

The FSIN claimed the executive fleet vehicles encounter extreme conditions and incur a significant number of kilometers each year, resulting in an average life expectancy of less than two years.

The audit says FSIN could consider trading in fleet vehicles to the dealership when new fleet vehicles are purchased instead of auctioning to employees.

Chief Bobby Cameron was given a raise of $60,000 in 2020, and vice chiefs were given $40,000 raises. The audit wasn’t able to determine if the increases included retroactive pay. If back pay was not included, executive members may have been overpaid by $147,000.

The FSIN hasn’t responded to multiple requests for interviews or comment from CTV News. Merasty said he doesn’t know anyone that’s heard from the executive since news of the audit began to surface two weeks ago.

“The lack of response from them, honestly, is perceived as admission of guilt,” Merasty said. “They should provide an explanation where this $34 million was spent.”

Without change, Merasty and other leaders CTV News has spoken with feel allegations of misspending will persist, and it’s time for the FSIN to shore up its internal policies and review legislation to prevent further damage.

“It’s not good governance,” Merasty said. “There’s so much division right now. We need to renew our traditional governance and our accountability.”

Another allegation flagged $425,804 paid to a former employee, including a severance payment that appears to have been inappropriate, as they were re-employed within one week of the payment, which the audit said appears to contravene FSIN regulations.

It also says the former employee resigned prior to being terminated without cause by FSIN, leading to the severance payout.

Potential overpayments to this employee were calculated at $246,524.